Support

A cookie is a piece of data stored by your browser or device that helps websites like this one recognize return visitors. We use cookies to give you the best experience on BNA.com. Some cookies are also necessary for the technical operation of our website. If you continue browsing, you agree to this site’s use of cookies.

State Officials:CMS Inflexible on Risk Adjustment Changes

May 27 — Without more flexibility from the HHS in administering an ACA program intended to
help insurers covering sick enrollees, more nonprofit CO-OPs and other small, new
entrants into the health insurance marketplaces may go out of business.

State insurance officials and insurance company executives told Bloomberg BNA that
steps taken by the HHS to help states mitigate problems from the Affordable Care Act
risk adjustment program appear to be of little use.

The risk adjustment program requires companies that cover healthier-than-average enrollees
make payments to companies with sicker-than-average members, and is under fire. Consumer
Operated and Oriented Plans created with government funding under the ACA as well
as other new plans have had to make large payments to established companies, which
has led them to seek changes from the Centers for Medicare & Medicaid Services.

Language in Interim Final Rule

CMS seems to be pushing responsibility to the states to address this problem. In a
May 11 interim final
rule on special enrollment periods and the CO-OP program, the CMS said, “HHS has become
aware that certain issuers, including some new, rapidly growing, and smaller issuers,
owed substantial risk adjustment charges that they did not anticipate. HHS has had
a number of discussions with issuers and State regulators on ways to help ease issuers’
transition to the new health insurance markets and the effects of unanticipated risk
adjustment charge amounts.”

The agency said that while a “robust” risk adjustment program is necessary to make
markets work under ACA rules guaranteeing that people with medical problems can buy
coverage, “We are sympathetic to these concerns and recognize that States are the
primary regulators of their insurance markets. We encourage States to examine whether
any local approaches, under State legal authority, are warranted to help ease this
transition to new health insurance markets. Additionally, we will also continue to
seek ways to improve the risk adjustment methodology.”

The CMS is expected to release figures for 2015 risk adjustment payments June 30.

Evergreen Payment Could Mean `We're Dead.'

If Maryland's Evergreen Health Cooperative Inc. has to make an expected payment of
$22 million in risk adjustment for 2015, “We're dead,” Chief Executive Officer Peter
Beilenson told Bloomberg BNA. The $22 million payment for the CO-OP, which had 30,000
members at the end of 2015, would be 26.5 percent of the almost $80 million it collected
in premiums that year, “which is insane,”
he said.

Evergreen made risk adjustment payments of about $2 million for 2014, a year when
it had only about 2,000 members until the last few months, Beilenson said.

Based on Maryland insurance company filings, all of Evergreen's $22 million expected
2015 risk adjustment payments as well as the estimated 2015 payments from all other
Maryland insurers will be paid to CareFirst BlueCross BlueShield, Beilenson said.
CareFirst BlueCross BlueShield declined Bloomberg BNA's request for comment.

Evergreen and Maryland Insurance Commissioner Al Redmer Jr. have made several proposals
to the CMS for temporarily changing the risk adjustment program until 2018, when the
CMS has said it is likely to make changes to the program. “Every one so far has been
shot down,” Beilenson said. CMS has said 2018 is the earliest time it could make major
changes to the program.

CMS Has Been `Intransigent.'

“They [the CMS]
have been absolutely intransigent and are clinging to this flawed formula, which will
lead to the demise of most CO-OPs” as well as other small entrants into the health
insurance market, Beilenson said. That would reduce competition and likely lead to
greater premium increases shortly before the presidential election in November, he
said. “It makes no sense.”

Beilenson said Evergreen was the most profitable CO-OP in the first four months of
2016, with
$700,000 in positive cash flow that could be re-invested into the nonprofit health
plan.

On May 26, Coordinated Health Mutual Inc. in Ohio went into receivership, the 13th
of the 23 CO-OPs to go out of business (103 HCDR, 5/27/16). The Ohio CO-OP cited the $3.4 million it had to pay for 2014 risk adjustment and
a liability of $6.2 million for expected 2015 payments as factors contributing to
its failure.

Maryland Insurance Commissioner's Requests

Maryland Insurance Commissioner Redmer, appointed by Gov. Larry Hogan (R), told Bloomberg
BNA he has had no success at getting the CMS to approve changes he thinks need to
be made to keep Evergreen operating.

Redmer testified before Congress in February calling for changes to the risk adjustment
program (38 HCDR, 2/26/16), and has asked whether risk adjustment payments could be delayed, modified or eliminated
for a period of time. “I'm looking for any flexibility,” he said, “and at this point
we have not found any.”

Redmer said he has met with Mandy Cohen, chief operating officer and chief of staff
of the CMS, as well as Kevin Counihan, director of the CMS's Center for Consumer Information
and Insurance Oversight and marketplace chief executive officer. “Sadly, other than
having dozens of conversations, we really are in a place that was no different from
a few months ago,”
Redmer said.

In addition to the language included in the special enrollment interim final rule,
Albright referred to other efforts the CMS has taken to address problems in the risk
adjustment program, including a conference the agency held in Baltimore March 31 and
a white paper (63 HCDR, 4/1/16).

New Mexico Official:
CMS Language of Little Use

The CMS's language in the special enrollment interim final rule has proved to be of
little use, Paige Duhamel, health policy manager for the New Mexico Office of Superintendent
of Insurance, told Bloomberg BNA.

The suggestions made in the interim final rule are applicable only if states have
the authority to adjust risk transfer payments after initial payments are made, Duhamel
said. “There are not a lot of states that are going to have the authority to tell
one insurance company to pay another insurance company any amount of money, especially
in the health and life markets,” she said.

“Our options appear to be fairly limited,” Duhamel said.

Superintendent John Franchini has called for temporarily capping payments made by
insurers under the ACA's permanent risk adjustment program at 2 percent of annual
premium revenue (249 HCDR, 12/30/15).

Latitude Given to States `Unclear.'

“It's unclear what latitude in practical terms CMS has actually given to states,”
Tom Policelli, chief executive officer of Minuteman Health Inc., told Bloomberg BNA.
For 2014, Minuteman, a CO-OP that operates in Massachusetts and New Hampshire, paid
about $3.8 million in risk adjustment payments, 71 percent of the premiums it collected.
For 2015, the company estimates it will have to pay as much as $17.6 million, 42 percent
of its premiums, he said.

Policelli said Minuteman could withstand the expected 2015 payment, but the result
is likely to be that the company has to request higher premiums for 2017. “Rate increases
across the country are happening because of two things that are working together—the
risk pool is not doing well [and] we're pricing out the healthy people” who don't
receive enough subsidies, he said.

The risk adjustment program “tends to force the prices higher on the lowest-cost products,”
because low-cost plans tend to have healthier enrollees, Policelli said. “You're left
with a pool that is just going to keep getting sicker and sicker.”

New Plans Adversely Affected

Richard Foster, who was the CMS chief actuary from 1995 until 2013 and is now a consultant
with Leavitt Partners working for a group of CO-OPs and provider-sponsored plans,
told Bloomberg BNA that new plans are being adversely affected by the risk adjustment
program.

New plans don't have medical claims data on their enrollees, and services provided
during the year in which risk adjustment payments are calculated “might not carry
accurate diagnoses with them,” Foster said. The CMS risk adjustment formula “depends
on diagnoses,” he said.

Further, the risk adjustment formula doesn't reflect plan efficiencies, such as network
discounts negotiated with providers, Foster said. Risk adjustment payments are based
on statewide average premiums, and “any plan that's more efficient than average won't
get credit for that. It will actually be harmed by the existing formula,” he said.

The Consumers for Health Options, Insurance Coverage in Exchanges in States, a coalition
of health plans that advocates for improvements in the ACA risk adjustment program,
put forward a list of
proposals March 29 for changing the risk adjustment program.

To contact the reporter on this story: Sara Hansard in Washington at
shansard@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at
kcasey@bna.com

All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.

Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)

Notify me when updates are available (No standing order will be created).

This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.

Put me on standing order

Notify me when new releases are available (no standing order will be created)